Unit factory's in a strata complex

As the thread title suggests I'm looking for opinions on investing in this class of industrial realestate . For one thing , they seem affordable and present well . Also I have just finished reading Lillie cawthornes book "The Money Factory" which had some good information .

I'm not a complete newby to industrial . We have a 4ha site leased to a trucking company for a few years now .

 

Commercial strata is a completely different beast to residential strata as owners are generally absentee and don't give a brass razoo about common areas, maintenance sinking funds etc.

Nett leases allow you to pass on all costs other than capital works.

 

Thanks Scott No Mates .

Are these types of investment likely to keep pace with inflation building costs etc ? They seem to be very popular with trades people and the like .

 

Some of them look so good you could live in them (of course you are not allowed to )

 

Depends upon supply and demand. Small units are entry level and may suit those seeking some space as they have outgrown their garage, storage units are very expensive by comparison (and quite small).

 

Do these types of units have good long term prospects in general ? I'm thinking a 30 year time frame . I was reading in the book I mentioned that building of these had stopped in the greater Sydney area for a few years after the GFC .

I will be freeing up some more time to look around next week down around Geelong and parts of Melbourne .

 

Not sure if there is a Victorian equivalent of the NSW or QLD Globe linky & Globe plug-in for google earth. Allows you to search all sales (including strata) once you upload earth & the plug in and turn on the appropriate boxes.

You can pull a report like this:


Without further investigation, you can't determine why some have resold at small or massive increases.

 

Thanks for that . Will check it out .

 

Hi Cousinit,

So let me start with I am a bit biased when it comes to strata anything. I don't like the static nature of these properties as you are unlikely to have any real way to value add as you can't add to them or develop to meet changing needs of tenants.

Typically I find that strata commercial has higher turnover of tenants as many business's out grow or fail as they are just starting out. Another problem is that developers generally build new ones after they have leased or sold the current stage. This can cause "market rent" to decline over 3-6 years as supply increases.

However they do provide a good entry point for mum & dad investors who want to get into CIP's and yields can be attractive vs residential leasing. Note that the business's you want as tenant's will be buying these as their accountants will tell them that they can purchase in their SMSF's.

So it really depends on how much you have to invest and your goals.

 

CIPs are very much dependent on the current and projected state of the localized economy. A bit like geared shares, when things are good its great and when things arent so great its potentially bad!

 

I like your reply and is right along the lines of what I have been thinking . I'm looking at them because of the affordability and the potential to cashflow reasonably well . We don't have millions to invest .

 

Entry level commercial strata is volatile. Your tenants are typically family businesses who cannot afford to buy - so the stability of your rental stream is under question.

If times go bad they can be empty for a long time and you can be continually trying to recover rent.

As you go up in price you start getting larger tenants. That can give you a better capacity to collect rent but you still have the vacancy issue.

And because it is strata doing something to the property is hard. Industrial areas tend to have lots of capacity for future building upgrades as pre fab big boxes are cheap to build.

It can work - but their is a price for that rental yield.

 

OK , very interesting . So assuming you work in this area like your username indicates ....?? What other types of ind property in the 1M or less market are worth a look ?

 

Caught me, I am writing up an introduction but I digress ...

It really depends on where you're at. Are you focusing on industrial properties for a reason (other than office/retail) if so why? What level of gearing are you expecting? TBH my main experience with strata industrial is in the Carrum Downs (Vic) area and surrounding. If I remember correctly Geelong was in a similar position, Local Council rezoned large amounts of land for commercial use and developers saw a cash cow (in the form of mum and dad investors looking to get IP's). In fact a quick look at realcommercial shows that there are still large chunks of land up for grabs.

Don't get me wrong a tilt slab factory with excess land around it can be a good investment and you can pick them up sub 1m. I just don't like strata because of the aforementioned reasons and these are compounded when large areas have been rezoned and development activity is high.

Hope I am not being a buzzkill, Just know that it can work, just do your homework and you should be aiming for a yield =>7% which is hard to find with current interest rates.

 

Hi

Are you an active commercial property agent in the Carrum Downs area now?

Regards,

alicudi

 

Hi Alicudi,

In terms of on market listings in that area I will admit that I am not active, however I have a number of managements in the area if that counts.

Regards
ComPropAgent

 

consider small cafe etc.. easy to rent, cheap to buy.. just make sure you are looking the units/shops that have high visibility and foot traffic.

 

This is an older thread but I'm now getting more serious in searching for an opportunity. I have settlement on the sale of business assets at the end of this month and will finally have time to get out and about .

The reason I'm attracted to industrial is I can relate to it and the commerce around it . I'm not a three piece suit wearing kind of guy !

I imagine it would cost quite a bit for tenants to set up in a tilt slab . If their business is going well why should they move ? Do leases tend to be shorter ? Do you see tenants renew and stay long term , say 10-20 years ?

 

If a lease agreement states as part of the outgoings that a tenant has to pay for strata fees, an owner is not allowed to pass on any costs for capital works? Is this part of law stopping owners from doing this?

 

@thesuperman - capital works are specifically excluded in retail leases and generally remain the lessor's responsibility in a commercial lease.